An electronic publisher treats the available advertising space as inventory.
As used herein, the term “inventory” can include available advertising space in a variety of media, including but not limited to web pages, portions of web pages, banners, buttons, pop-up windows, placement within sponsored search listings, and streaming media (including video and/or audio). Each time one of these advertisement types is played for or presented to a user constitutes an “impression.” The inventory of advertising space includes the capacity to render advertising in any of these formats.
The term “advertising” as used herein is not limited to commercial advertising, but may also include any purchase of the ability to deliver information content of any type. For example, a public service notice or a pure entertainment streaming video that is purchased by a sponsor, but only delivers information to the recipient without asking the recipient to take any action or make any purchase would still be encompassed by the term “advertisement” as used herein.
A unit of delivery for advertising may be referred to as a line. A line refers to one particular set of creative expressions delivered over one particular period of time for a web site. A line is also a unit of purchase, so it has an associated particular rate or cost.
Advertising media inventory may be divided into two general classes. The first type is “guaranteed” (also called Class I). This inventory is generally paid for in advance and is guaranteed (by contract) to be delivered within a certain period. Because of this constraint, Class I inventory cannot be oversold, and an inventory management system exists to measure and regulate inventory availability. Class I inventory is generally sold to large, branding-oriented advertisers who need reliable delivery to achieve their marketing goals and are willing to pay premium prices for that inventory. Class I inventory is typically sold on a cost-per-impression (CPI) basis.
The second type of media inventory is “preemptible” or non-guaranteed (referred to herein as “Class II.”) It comprises the remnant of available inventory after Class I is served. Class II advertising is generally paid for in arrears, because it can be preempted at the publisher's discretion without violating any contractual obligation. Class II inventory serves as a sink for excess supply and can be thought of as a “spot” or “auction” marketplace. This inventory is usually sold to smaller advertisers, often to direct marketers who wish to drive transactions rather than branding.
Class II inventory is most frequently sold on a performance basis, meaning that the advertiser pays based only in the event of a response to an ad, rather than just for placement of that ad. This performance basis adds uncertainty to the estimation of the value (on a per-impression basis) of a media purchase.
There are two general types of performance based advertising deals: “cost-per-click (CPC)” and “cost-per-acquisition (CPA).” Cost-per-click deals require the advertiser to pay the electronic publisher a fixed amount per click by an end user that sees or hears the advertisement. This cost-per-click is also called a “click bounty”. (This requires the viewer to take an action, but does not necessarily require a purchase by the viewer to trigger an obligation for the advertiser to pay the publisher.) Cost-per-acquisition deals, on the other hand, require the advertiser to pay the electronic publisher a fixed amount per action that happens after the click. For example, an advertiser might pay a fixed bounty for each new membership to their site that was driven from the advertisement. The advertisement must actually be effective (in leading a viewer to purchase goods or services) in order to trigger an obligation for the advertiser to pay the publisher for the advertisement. This cost-per-acquisition is called an “acquisition bounty”.
The prior art advertisement delivery system was designed for Class I inventory. The prior art system assumed that the sum of all the sales will be less than or equal to the available inventory. This is enforced by an inventory prediction system and scheduling system. In this environment, the ad server was designed to satisfy as many contracts as possible on schedule. Thus when selecting an ad, the ad server finds the set of all appropriate ads and chooses the one from the contract that is most behind on its delivery schedule. If no contracts are behind then no ad is chosen. Since the system constrains the sold inventory to less than or equal to 100%, this results in the most Class I contracts being satisfied on schedule.
In Class II advertising, it is to the publisher's disadvantage to limit contracts to only 100% of the available inventory. Also, because the contract allows the advertisement to be delayed (e.g., to service a more profitable advertiser), it is disadvantageous to always service a contract that is most behind on its delivery schedule.
The prior art electronic advertising environment required manual optimization of the preemptible inventory by removing low-value campaigns. This was complicated by the fact that optimal behavior required that orders be balanced with available inventory. Because Class 1 inventory fluctuates daily, this required unrealistic human maintenance effort and the inventory was frequently improperly scheduled.
In addition, estimations of the value of the Class II inventory were difficult and often incomplete. The Class II advertisers pay on a per-click or per-acquisition basis, but the advertisements must be scheduled on a per-impression basis. The number of impressions required to generate a desired number of clicks or acquisitions was not known. Schedulers would choose which contract to run based on criteria such as client size, relationships with sales people, or the like. This frequently led to an inappropriate mix of contracts being scheduled.
An improved system to scheduling electronic advertisements is desired.